The Income Tax Department has introduced a significant reporting change in the Income Tax Return (ITR) utilities for Assessment Year (AY) 2026-27 — a new disclosure field that, despite appearing minor, has caused considerable confusion among taxpayers and professionals.

Introduction

A new disclosure field named "Receipts not in the nature of income" has been added under the Schedule for Exempt Income in the online filing utility and the JSON utility. Although this appears to be a minor change, it has raised a series of practical questions that have no direct answer in the Income-tax Act:

• Should loans be reported?
• What about gifts from relatives?
• Should GST collections be reported?
• If a loan is repaid during the same year, should it still be disclosed?
• Are all capital receipts required to be reported?

This article analyses the legal provisions, practical implications and the likely intention of the Income Tax Department.

Why has this new field been introduced?

Until AY 2025-26, taxpayers generally reported every non-taxable receipt under Other Exempt Income. However, this was technically incorrect, because there is a fundamental difference between two distinct categories.

Exempt Income

Income which is taxable in principle but specifically exempt under the Act. Examples include agricultural income, PPF maturity, gratuity exempt under Section 10, and life insurance proceeds exempt under Section 10(10D).

Receipts which are not income at all

Receipts that never become income in the first place — such as a loan received, a gift from specified relatives, capital introduced, sale of rural agricultural land, or the refund of a security deposit.

The newly introduced field appears to separate these two categories for better reporting and to reduce unnecessary scrutiny arising from AIS, SFT and bank transaction matching.

The basic principle

Ask yourself only one question:

If yes, this new disclosure field is the appropriate place. If the receipt is exempt because of Section 10, then continue reporting it under the relevant exemption.

Exempt Income vs Non-Income Receipts

What receipts should normally be reported?

1. Loans received

Housing loans, personal loans, vehicle loans, business loans, and loans from relatives or friends. These are capital receipts — they are not income.

2. Gifts not taxable under Section 56(2)(x)

Gifts from parents, spouse, or siblings; gifts received under a Will; inheritance; and gifts on marriage.

3. Sale proceeds of Rural Agricultural Land

Rural agricultural land is not a capital asset under Section 2(14). Accordingly, sale proceeds fall outside the capital gains provisions.

4. Capital Introduced

Proprietor's capital, additional capital contributions, partner's capital contributions, and share capital introduced.

5. Refund of Deposits

Refunds of rental security, electricity, telephone, or builder deposits.

6. Refund of Advances

Amounts returned on a cancelled property booking, a supplier advance refunded, or a vendor advance recovered.

7. Recovery of Principal

Loan recovered, fixed deposit principal, deposit withdrawn, or the return of your own investment. Only the income component is taxable — the principal is not.

What should generally NOT be reported?

The following receipts are merely pass-through amounts and not beneficial receipts.

GST collected from customer

GST is later deposited with the Government. Although money is received, it is merely collected on behalf of the Government. In my opinion, this should not be reported.

TDS deducted

There is no receipt. Nothing to disclose.

PF and ESI recovered from employees

Collected on behalf of employees — not your receipt. The same treatment applies to ESI.

Client reimbursements and escrow money

Pure reimbursement of expenses generally need not be disclosed. Escrow money is held in a fiduciary capacity and is not beneficially received.

What if the amount is received and repaid in the same year?

This is one of the most frequently asked questions. Consider three scenarios.

In my professional opinion — Yes, it should be reported. The field is called "Receipts not in the nature of income." It does not ask for the closing balance, the outstanding amount, or the net receipt. The receipt actually occurred, and repayment later does not alter its nature.

There was an actual capital receipt. In my view, it should be reported.

The receipt actually occurred, and therefore it may be disclosed.

A practical test

Work through these three questions in order.

Practical reporting table

Is disclosure mandatory?

The introduction of this field does not automatically make disclosure mandatory for every capital receipt. Tax professionals have observed that the change is primarily a reporting improvement, not the creation of a new tax liability. Reporting significant non-taxable receipts — such as gifts from specified relatives or sale proceeds of rural agricultural land — may help explain the source of funds and reduce automated queries where the Department already has information from AIS, SFT or other sources.

Final thoughts

The new field is a welcome step towards improving the quality of disclosures in Income Tax Returns. It distinguishes between income which is exempt and receipts which never become income in the first place. However, since there is currently no CBDT Circular or official guidance explaining its exact scope, taxpayers and professionals should adopt a reasonable, consistent and well-documented approach.

My practical recommendation is:

• Report significant capital receipts where you are the beneficial recipient — loans, gifts from specified relatives, capital introduced, refunds of your own deposits, and sale proceeds of rural agricultural land.
• Do not report pass-through or fiduciary collections — GST, TCS, employee PF deductions, escrow funds or other amounts merely collected on behalf of someone else.

Where there is doubt, maintain proper documentation to establish the nature of the receipt in case any clarification is sought in the future.